Continued investment is likely to be seen in the Indian luxury space on the back of market-making moves by leaders in this space, according to a report by Confederation of Indian Industry (CII) and AT Kearney. The report estimates that India is likely to see continued investment, with positive sentiment and Indian luxury set for a 20% growth in the year ahead.
The report suggests that luxury players in India have three paths to choose from ? growing cautiously by getting the basics right; experimenting selectively to adopt a differentiated position in the market; or gaining the first-mover advantage in high-potential sectors by bold ?market making? moves.
The luxury market witnessed a robust growth of 20% over the past year and is estimated to have reached $5.8 billion, in line with the five-year projections. Luxury products have grown the fastest at 29%, well above expectations of 23%, says the report.
The report says that luxury has gone beyond Delhi, Mumbai and Bangalore, to Chennai, Hyderabad and Pune, which collectively now have over 30 stores in apparel, accessories, watches and personal care.
Similarly, North Mumbai and Gurgaon are two new distinct catchments that have emerged. Car dealerships are the most penetrated, with more than 50% of their dealerships outside the metros.
The report says that while jewellery, electronics, cars and fine dining have grown beyond expectations, apparel, accessories, wines and spirits have continued their strong growth. Real estate and yachts have remained more or less flat due to high prices and absence of marine infrastructure, respectively. The report suggests that consumers are accepting and adopting global trends much faster than anticipated. Digital and social media have made it possible for companies to connect with the once hard-to-reach Indian consumer.
On the other hand, infrastructure challenges and regulatory constraints continue to exist and are not likely to be resolved easily in the near future, creating doubts about the sustainability of this sector. Private equity investments in Genesis Colors and Kimaya reinforce the belief in the sector.
Reservations on luxury purchases are clearly declining, with price parity with Dubai and Singapore being very clearly attempted and communicated.
The need for Indianisation is being realised by players and some efforts are visible in apparel, watches and cars. The regulatory structure has also largely remained unchanged over the past year with the recent news about 100% FDI in single brand retail creating hope amongst global brands.